A Canadian equity mutual fund buys 1 million shares of a denominated common stock for...
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A Canadian equity mutual fund buys 1 million shares of a £ denominated common stock for a holding period of 6 months. The relevant information for this investment is as follows: Current price per share = £ 50 Expected price per share after 6 months = £ 52 Expected dividends per share at the end of 6 months = £ 1.2 Current exchange rate between £ and CS = C$1.8 per £ The expected exchange rate between £ and CS after 6 months = C$1.82 per £ (i) Calculate the expected rate of return on the investment. (ii) Calculate the effect of the expected rate of appreciation or depreciation of £ against CS on the expected rate of return of the investment. A Canadian equity mutual fund buys 1 million shares of a £ denominated common stock for a holding period of 6 months. The relevant information for this investment is as follows: Current price per share = £ 50 Expected price per share after 6 months = £ 52 Expected dividends per share at the end of 6 months = £ 1.2 Current exchange rate between £ and CS = C$1.8 per £ The expected exchange rate between £ and CS after 6 months = C$1.82 per £ (i) Calculate the expected rate of return on the investment. (ii) Calculate the effect of the expected rate of appreciation or depreciation of £ against CS on the expected rate of return of the investment.
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Answer rating: 100% (QA)
To calculate the expected rate of return on the investment we need to consider both the capital gain from the change in stock price and the dividends ... View the full answer
Related Book For
Financial Reporting and Analysis
ISBN: 978-0078025679
6th edition
Authors: Flawrence Revsine, Daniel Collins, Bruce, Mittelstaedt, Leon
Posted Date:
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